Consider a Portfolio with a Known Average Return and Standard

question 142

Multiple Choice

Consider a portfolio with a known average return and standard deviation. Which of the following stocks, if added to the portfolio, will reduce its risk through diversification?

• A) A stock whose return is perfectly negatively correlated with the portfolio's return
• B) A stock whose return is perfectly positively correlated with the portfolio's return
• C) A stock whose return has zero correlation with the portfolio's return
• D) Any stock added to a portfolio will reduce its risk regardless of its correlation with the portfolio

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Definitions:

Surgery

A medical procedure involving an incision with instruments, performed to repair damage, remove diseased tissue, or improve bodily function.

Surgical Asepsis

Techniques used to maintain a sterile environment during surgical procedures to prevent infection.

Mayo Stand

A movable stand used in medical settings, typically in surgical rooms, to hold surgical instruments and supplies.

Medical Asepsis

Practices aimed at reducing the risk of infection and maintaining cleanliness in medical settings to prevent the spread of pathogens.